Was state's climate change auction a success?

SACRAMENTO  California businesses snapped up — at bargain prices — the entire first wave of permits for releasing greenhouse gases linked to climate change. But how the auction’s results ultimately affect consumer prices on an array of products and services remains fiercely contested.

The permits, sold at an auction last week, are part of the state’s goal to lower greenhouse gas emissions to 1990 levels by 2020. Companies will need to comply by taking measures such as buying new equipment, updating their fleets of vehicles and adopting new technologies. Those that move aggressively to reduce emissions will earn permit credits they can sell at auctions to companies that exceed their pollution limit.

Supporters of the initial auction said the initial high demand and low prices could foreshadow fewer economic hardships for businesses, which should mean less of an impact on consumers as well.

Critics said millions of dollars changed hands — money that eventually will come out of consumers’ pockets one way or another as companies seek to recoup the added expense.

In a related development with direct pocketbook implications, the Public Utilities Commission is proposing to require San Diego Gas & Electric and other investor-owned utilities to credit ratepayer bills as part of an agreement involving permits for those power providers.

In a statement, SDG&E said it is reviewing the proposal but “at first read this is a positive step for residential customers.” The company added that it wants to pursue changes in the allocation formula for its business clients.

PUC data suggests that the price paid at last week’s auction for permits — $10.09 per ton — would lead to an increase of about 2 percent for residential customers and an even smaller rate hike for businesses.

The PUC plans to consider finalizing its proposal for the utilities by Dec. 20.

The current carbon market is trading at $12 to $13. Companies must buy in increments of 1,000 permits, which are officially called allowances. Each allowance is good to exchange for credit to emit 1 ton of carbon dioxide.

California’s Air Resources Board developed an auction system that initially gives businesses 90 percent of their allowances for free. Selling the rest will establish a per-ton price for carbon emissions. That price will help each company determine whether it’s better to invest in new technology and equipment, trade in their allowances or buy even more permits. Companies that fall below the cap can choose to sell the permits they hold, potentially at a profit.

San Diego County Supervisor Ron Roberts, who sits on the Air Resources Board, said while results of the first auction are still being analyzed, there is no question that it allayed fears of manipulation or that financial speculators would wind up controlling a large share of permits.

What the industry instead saw was a “competitive” auction, he said. Those who have to comply bought 97 percent of the allowances.

“The good news is there was no bad news,” Roberts said. “There are no major surprises and prices are in line.”